Investment Q&A

Q: Good morning
Peter: 1. When selling options, what is your preference ? Call or Put options
2. What is your favorite time frame for selling options? ( 2 weeks, 4 weeks etc. )
3. What is your approach for choosing a strike price?
Thank you for educating all of us.
M.F.

Q: Good morning
A fundamental question regarding rising interest rates. Does a period of increasing rates typically encourage an inflow of foreign investment into domestic equities or an outflow? Based on your past experience, how has the TSX performed under increasing rates?

Thank You
Clarence

Q: Hi 5i Team, when someone looks at the financials of a company for the sustainability of the dividends, should we concentrate on the earnings or the cash flow numbers? I have often read on this site that the cash flow is more important than the earnings. Would that be true for most companies or only the ones in some industries? Thank you. Mario.

Q: As a recent subscriber and investor, I note that several stocks that I own have the option of DRIP. My portfolio is large enough that the quarterly dividends allow for a substantial purchase of new or existing additions to stocks, like CAE or Boyd. As the cost of buying the stocks is not overly impactful to the purchase, is foregoing the drip, and the 5% discount, advisable, in order to allow a choice in selecting stock picks?

Thanks. KC

Q: Hi 5i team,

I am trying to save to retire early or if the doesnt happen then just have much more saved when I do. I know I should max both TFSA for my wife and I, but how much %-wise should I put in a registered vs a non-registered? I'm stilll 14 years away from my ideal retirement date and about 24 from my latest. Right now I have about 30% of my total saving in a non-registered account, and have yet to max out my wifes RRSP but should I just put it all in a registered account then use just the TFSA for liquidity? I'm sorry if the question is not quite within the purpose of 5i, but I do value you guy' opinion highly.

Thank you

Q: Hi Gang

Our parents are in there 80/90s , in fairly good health, and are just now moving to a retirement home, which will cost approx $5000 pm. Their assets are largely sitting in cash. Can you recommend investments to create more income for them? They have 300-400M to invest.

Thanks Mike B

Q: I currently have about 5%- 7% of my portfolio in materials - SJ and MX specifically. If you accept the thesis that worldwide economic growth is improving would it be wise to also have some metals representation in my holdings or would you expect all materials to grow at the same time - i.e. a rising tide lifts all ships. I was thinking of Teck.B for this purpose if you think it is warranted. I do realize that 3 stocks are usually better than two for diversification but I only want to add (or switch) if you think I would be missing out on an important sector.

Appreciate your insight.

Paul F.

Q: On June 28 you answered a question for me about using market/limit orders and suggested that I should use them for illiquid stocks. I was wondering if you could provide a concrete example of what you would do as I am having trouble understanding how best to buy/sell in these situations. If, for example, a stock had a bid of $34.61 and an ask of $34.90, at what prices might you submit for either a sell or a buy of that stock?

Thanks for your help.

Paul F.

Q: Hello 5i team,
When the US Fed or the BOC talk about raising rates, are they talking about the short term or longer term rates. Do they consider the effect of such a move on the shape of the yield curve?
Thanks,
Antoine

Q: The recent cashing in of my pension has left my account with a lot of cash that I have been hesitant to deploy in the current market environment. Rather than outright purchasing some of the names on my watch list, I am considering selling calls on the stocks I would like to hold. This way I can collect a premium which is a bit of compensation if the stock goes up and I miss out, and if it goes down to the exercise price I end up owning a stock I wanted anyway at a lower price and with the option premium. Does this strategy make sense to you? If yes what would be your guideline for expiry dates and strike prices and can you suggest any good candidates for this strategy from the BE and growth portfolio?

Q: Apparently there exists a ratio that gives a probability on accounting/financial manipulation. Could you tell us the name of that ratio and whether or not there is a website that shows what it is for any company? If there isn't, is the problem that the variables it is based on are not always public? Otherwise, it seems a great metric for any site (Google Finance, Globe Watchlist) to add. A quick search seems to show that there is quite a lot of interest in detection methods. There is even a professor at the Toronto Rotman School of Business who works in the area. Some call it forensic accounting.

Q: Good morning,

Can you tell me the effect of the increase of the interest rate in Canada on each of the tsx sectors?

Thanks
Paul

Q: A number of posters list off several holdings in a given sector. If you hold several stocks in each sector, don't you end up with an unwieldy number of stocks? Are there sectors where diversification is more important than others? How does one determine how many stocks in each? Am I missing something in thinking you'd end up with insignificant amounts of a large number of stocks? i know: a lot of questions. Dock whatever seems appropriate.

Q: Hello 5i team,
I’m 74 years old; with due diligence and with the contribution of people like you, my RRIF portfolio is behaving very well. My plan is to deplete the RRIF portfolio at age 90. The revenue from this portfolio will continue at the same level if I get a 7% compound annual total return in the next 16 years.
Unfortunately, we expect a recession sometime during those years. If I were to ride the recession, the value of the portfolio would stand still for (let’s say) 5 years and if the portfolio were to grow by 7% in each of the remaining years, my revenue would drop by a whopping one third. In order to maintain the expected level of revenue, my excel projection model indicates that I should obtain a 20% growth per annum instead. That is unrealistic.
Alternatively, I could do what I did in 2008. I sold my holdings after incurring a 15% decline and re-entered the market a few months after it bottomed and started on its recovery path. If I did that and planned for a 7% growth per annum, the revenue would drop by 13% only. That is quite acceptable because there is a 10-15% safety margin in my revenue forecast…a cushion of sorts.
If, however, I knew when the recession will occur, I would exit the market ahead of time and re-enter after the bottom…”but that is another story”.
I would greatly appreciate your collective opinion.
Best regards,
Antoine

Q: Regarding sector percentage allocations, please suggest an appropriate mix for someone in their 70's with protection of capital as the main goal and being aware of the changing interest rate environment. Thank you.

Q: I've spreadsheet-ed all 5i stocks plus others and populated each stock's core fundamental and technical factors. If you could only sort & rank by "Earnings per Share" Growth Rate (i.e. 2016, 2017, 2018) or Earnings Yield (TTM) which one would you choose to rank stocks by and why?

Q: On July 7, 2017 in answer to question about ENGH posted by KC, you state that "...We really do not expect the tech decline to last long." How so? What parameters you look at? Are these fundamental or technical? Thanks

RR

Q: Hi Peter & co.: I often hear the term "full position or half position " what exactly does that mean?
Secondly, how many companies should one monitor in their portfolio? Thanks

Q: Good morning Peter,

When looking at reversion to the mean, the near-term chart can be different from the long-term chart. For instance, the one-month chart for QQQ at closing on Friday, July 7, shows it to be below the mean suggesting a good buying time. However, the 10-year chart shows it to be significantly above its mean suggesting a good time to take profits.

Which is the more important indicator?

Thank you.

Milan

Q: Hi 5i team,
You recently mentionned that you expect the downturn in the technology sector to be short lived, because it is one sector where investors can find growth, and that the down trend could/would/should be reversed when second quarter results start to be released. What companies (presumably in the USA) will start this release period in the technology sector and at what dates? Thank you, Eric